Gold up on optimism over Greek-debt deal

Other metals also gain as dollar dips and U.S. stocks gain

SAN FRANCISCO (MarketWatch) — Gold futures on Thursday extended their advance to a second day, partly on investor hopes that Greece is on the verge of closing the deal on its crucial debt swap, but fell short of the $1,700-an-ounce mark.

Gold for April delivery
GCJ2
added $14.80, or 0.9%, to end at $1,698.70 an ounce on the Comex division of the New York Mercantile Exchange.

Gold rose 0.7% on Wednesday, breaking a three-session losing streak.

Most metals tracked gold higher on growing optimism that Greece will complete its long-awaited debt swap with private bondholders.

A majority of the bondholders have indicated they will participate in the swap ahead of a deadline later Thursday, according to news reports. Read about Greece's bond deal

“Risk is back on the table,” said Frank Lesh, broker and futures analyst with FuturePath Trading in Chicago. While a successful swap in Greece “does not fix everything,” it’s pushed markets higher for the time being, he added.

The hopes for some resolution in Greece’s debt restructuring also helped strengthen the euro, weighing on the ICE dollar index
DXY, +0.00%
The index, tracking the dollar against a basket of six currencies, fell at 79.312 from 79.692 late Wednesday.

Weakness across emerging markets

(2:57)

Fresh signs of economic weakness crop up in Brazil, China and other emerging markets that had seen robust growth over the past several years. (Photo: Reuters)

A weaker greenback tends to support dollar-denominated commodities as it makes them cheaper to holders of other currencies.

Gold lately has behaved more like a classic commodity than a flight-to-safety instrument, according to Adam Klopfenstein, strategist with Archer Financial in Chicago.

It would have to trade above $1,735 an ounce “before I view it as a solid up trend,” he said.

Earlier Thursday, the European Central Bank did as expected, holding monetary policy steady and keeping its key lending rate unchanged at 1%. As a result, attention shifted to comments by ECB chief Mario Draghi for any signs that expanded liquidity would be in the offing, analysts at Commerzbank wrote in a note. Read more on Draghi’s remarks.

“Fears of rising inflation and low rates of interest long term should have a positive impact on the gold price,” the analysts said.

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